A “risk arbitrage” (or “merger arbitrage”) strategy: A. is considered a “long volatility” strategy. B. experiences losses when a planned merger is cancelled. C. involves purchasing the stock of an acquiring company.
A merger arbitrage strategy is considered a “short volatility” strategy: this strategy will experience a loss if the expected merger is cancelled. This strategy involves purchasing the stock of the target company and shorting the stock of the acquiring company.
